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Do Insiders Own Lots Of Shares In Estrella Resources Limited (ASX:ESR)?

Simply Wall St

Every investor in Estrella Resources Limited (ASX:ESR) should be aware of the most powerful shareholder groups. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. Warren Buffett said that he likes 'a business with enduring competitive advantages that is run by able and owner-oriented people'. So it's nice to see some insider ownership, because it may suggest that management is owner-oriented.

Estrella Resources is a smaller company with a market capitalization of AU$3.7m, so it may still be flying under the radar of many institutional investors. Taking a look at our data on the ownership groups (below), it's seems that institutions are not on the share registry. Let's take a closer look to see what the different types of shareholder can tell us about ESR.

Check out our latest analysis for Estrella Resources

ASX:ESR Ownership Summary, September 27th 2019

What Does The Lack Of Institutional Ownership Tell Us About Estrella Resources?

We don't tend to see institutional investors holding stock of companies that are very risky, thinly traded, or very small. Though we do sometimes see large companies without institutions on the register, it's not particularly common.

There are many reasons why a company might not have any institutions on the share registry. It may be hard for institutions to buy large amounts of shares, if liquidity (the amount of shares traded each day) is low. If the company has not needed to raise capital, institutions might lack the opportunity to build a position. It is also possible that fund managers don't own the stock because they aren't convinced it will perform well. Estrella Resources might not have the sort of past performance institutions are looking for, or perhaps they simply have not studied the business closely.

ASX:ESR Income Statement, September 27th 2019

Estrella Resources is not owned by hedge funds. As far I can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Estrella Resources

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The company management answer to the board; and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board, themselves.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our most recent data indicates that insiders own a reasonable proportion of Estrella Resources Limited. Insiders have a AU$811k stake in this AU$3.7m business. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

The general public -- mostly retail investors -- own 52% of Estrella Resources. This level of ownership gives retail investors the power to sway key policy decisions such as board composition, executive compensation, and the dividend payout ratio.

Private Company Ownership

We can see that Private Companies own 26%, of the shares on issue. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

I always like to check for a history of revenue growth. You can too, by accessing this free chart of historic revenue and earnings in this detailed graph.

If you would prefer check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, backed by strong financial data.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.